The USD Holds Firm…
It’s really all about waiting for that magic precipice at the end of the day, isn’t it? Do we fall over, or do we jump? Over the last week, the Forex market was quiet, as investors waited for the US Non-Farm Payroll data to be released. We were definitely treated to some fireworks on Friday and, without a doubt, heartrates escalated. The market, however, is still playing us – will the FED raise interest rates, or won’t it.
The Fed Chairs comment last week at Jackson Hole that there could be an interest rate hike in the near future left the market anxiously waiting the NFP data as this is usually a strong indicator for data to be released later on in the month. The data was disappointing coming in at +151K versus +180K expected, by no means a shocking number but weak enough to eliminate what glimmer of hope of a September rate hike – or so you would think!
The reaction to the number was for the USD to weaken against all major pairs, the surprising factor was that shortly afterwards the USD completely reversed these losses and was even able to trade at session highs. This move has led to speculation that this number won’t hold back the Fed and that there may still be a slim chance of hike in September and highly probably at least one hike this year.
This could be the case, my opinion is that the market is confused. Regardless of where we are in the rate cycle, the US economy at the current time seems to be streets ahead of all other major economies. To sell USD you affectively would have to be backing another currency and that is slim pickings, perhaps the rampant USD of late is not an indication of investor confidence in a US rate hike but rather an indication that the market is not ready to take a “punt” on any other currency.
The EURUSD seems to be forming a bit of range at present between 1.1150 and 1.1200, perhaps the end of Northern Hemisphere summer will be the catalyst for a clear break.
GBPUSD was really impressive this week and continues to march on against the USD, could there be just a little more petrol in the tank leading into next week.
The only other currency worthy of a honourable mention this week was USDCAD, it spent most of the week on the back foot but was at its resurgent best on Friday as with the help of improving oil prices was able to significantly rally against the greenback.
Although we should start to see some increasing volumes in the market due to the end of Northern Hemisphere summer holidays, we still need to be cautious on Monday as both the US and Canada will be enjoying a long weekend – perhaps one last soiree before the end of summer… Pretty much like the market players who might be putting on their winter boots because they are not willing to take big positions ahead of the Fed later in the month.
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